Strategy formulation: SWOT, TOWS and corporate strategies
Formulation turns SWOT/TOWS insight into choices: grow, stay stable, retrench or combine (Glueck), and grow by integration or diversification; Porter's generic strategies decide how to compete.
TOWS matrix (Weihrich, 1982)
| Cell | Logic | Nickname |
|---|---|---|
| SO | Use strengths to seize opportunities | Maxi-maxi |
| WO | Overcome weaknesses by using opportunities | Mini-maxi |
| ST | Use strengths to counter threats | Maxi-mini |
| WT | Cut weaknesses and avoid threats; defensive | Mini-mini |
Glueck's grand strategies
| Strategy | Meaning | Variants |
|---|---|---|
| Expansion (growth) | Substantially widen products, markets or functions | Concentration (intensive), integration, diversification, cooperation (mergers, JVs, alliances), internationalisation |
| Stability | Continue the present business with only incremental change | No-change, profit, pause/proceed-with-caution |
| Retrenchment | Cut back scope to improve performance | Turnaround, divestment, liquidation (and captive company) |
| Combination | Different strategies in different businesses at the same time | Grow one SBU while divesting another |
Integration and diversification
| Type | Direction | Indian example |
|---|---|---|
| Backward vertical integration | Towards suppliers (inputs) | Reliance moving from textiles into polyester, petrochemicals and refining; Tata Steel's captive mines |
| Forward vertical integration | Towards customers (distribution) | Reliance Industries moving from refining into its own fuel retail outlets (now run by the Jio-bp joint venture) |
| Horizontal integration | Same stage, often buying a competitor | Tata Steel acquiring Corus (2007) |
| Concentric (related) diversification | New business linked by technology, markets or skills | Titan moving from watches into jewellery (Tanishq) and eyewear |
| Conglomerate (unrelated) diversification | New business with no clear link | ITC moving from cigarettes into hotels, paperboards and packaged foods |
Porter's generic strategies (1980)
| Strategy | Scope | Source of advantage | Indian example |
|---|---|---|---|
| Cost leadership | Broad | Lowest cost in the industry | D-Mart: everyday low prices from low costs |
| Differentiation | Broad | Unique value that buyers pay more for | Tanishq: trust, design and assured purity |
| Cost focus | Narrow segment | Lowest cost within a niche | Ginger (IHCL) budget hotels |
| Differentiation focus | Narrow segment | Uniqueness for a niche | Taj luxury hotels |
Traps and extras
- SWOT: strengths and weaknesses are internal; opportunities and threats are external.
- Ansoff's intensive options (market penetration, market development, product development) are the concentration route to growth.
- Turnaround repairs a sick business; divestment sells a part; liquidation closes and sells everything, the last resort.
- Taper integration: a firm makes part of its needs and buys the rest. Quasi-integration: it buys from suppliers it partly controls.
- Stuck in the middle (Porter): a firm that tries for both low cost and differentiation and achieves neither.
- Combination strategy: a conglomerate expanding one business while retrenching another.
NET asks you to classify a move (backward vs forward, concentric vs conglomerate), fill the TOWS cell for a situation, and list Glueck's grand strategies. Retrenchment's forms come up as matches.
Typical MCQ: “A tyre company buys a rubber plantation. What strategy is this?” Backward vertical integration (towards an input). Trap: it is not diversification, because the new stage feeds the same business.
Typical MCQ: “Which TOWS cell uses strengths to counter threats?” ST (maxi-mini). Trap: SO uses strengths to seize opportunities; WT is the defensive mini-mini cell.
Glueck's ESRC: Expand, Stay, Retreat, Combine. Retreat three ways, 'TDL': Turn around, Divest, Liquidate.